TAIKO Token

TAIKO Token is the native utility token of the Taiko Layer-2 blockchain, designed to facilitate various functions within the Taiko ecosystem. As a part of the network, TAIKO Token serves multiple roles, including governance, staking, incentives, and transaction fee payment. Understanding the utility and functionality of TAIKO Token is crucial for comprehending the broader economic structure and incentive mechanisms of the Taiko network.

The main function of TAIKO token is to ensure network security. Validators and network participants need to stake TAIKO tokens to participate in the validation process, ensuring that validators have economic incentives to maintain the integrity and security of the network. If validators act maliciously or fail to fulfill their duties, their staked tokens may be reduced, creating a strong economic deterrent against misconduct.

TAIKO tokens are also used for governance, and token holders can participate in governance decisions through them, such as protocol upgrades, network parameter changes, and other related decisions that will impact Taiko's future.

The token is used to pay for transaction fees within the Taiko network, and the fees associated with transactions are paid in TAIKO tokens, making it an important part of the network's economic model. Due to the high efficiency of the network, these fees are typically lower than those on the Ethereum mainnet, providing users with a more cost-effective trading option.

Token allocation and distribution

The Taiko protocol has established a tokenomics plan to ensure the sustainable growth and governance of its ecosystem. The total supply of Taiko tokens ($TAIKO) is set at 1 billion, with distribution strategically designed to support various aspects of the network, from incentivizing early participants to ensuring long-term project sustainability.

Token distribution breakdown:

• Investors:11.62% of the total token supply is allocated to investors. These tokens are subject to a four-year lock-up period, with an initial lock-up period of 12 months. After this period, 25% of the unlocked tokens will be available, with the remaining 75% being unlocked linearly over the next three years.
• Taiko Labs Team:20% of the tokens are reserved for the team. Similar to investor tokens, these tokens are also subject to a four-year lock-up period, with an initial lock-up period of 12 months. This structure aligns the team's incentives with the long-term success of the project.
• DAO Treasury:20% of the total supply is allocated to the DAO treasury. This allocation emphasizes Taiko's commitment to community governance and ensures that the DAO has sufficient resources to fund future development and plans.
• Taiko Foundation Reserves:16.88% is reserved for the Taiko Foundation. These tokens provide financial buffer for the protocol to cope with unforeseen challenges and opportunities.
• Gifts and Retroactive Public Goods Fund (RetroPGF):5% of the tokens are reserved for grants and Retroactive Public Goods Fund (RetroPGF). This allocation supports ecosystem growth by rewarding contributors who add value to the Taiko network.
• Genesis Airdrop:5% of the total supply is allocated to the Genesis airdrop, aimed at rewarding early supporters, testnet participants, and contributors by distributing tokens to users who actively participate in the Taiko ecosystem to promote network development.
• Liquidity and Market Making:5% of the tokens are used to enhance market liquidity and stability, ensuring a smooth trading experience on various exchanges.
• Pioneer Airdrop:10% is allocated for a separate airdrop activity targeting active community members and early adopters, rewarding their contributions to the project’s growth.
• Prover Bond and Guardian Prover: 2.5% of the tokens are reserved for validator bonds and guardian validators to ensure the integrity and security of the network in the early stages.

Token lock-up period and unlocking plan

The token lock-up period structure is designed to align the interests of all stakeholders with the long-term success of the Taiko protocol. After the Token Generation Event (TGE) on June 5, 2024, the tokens allocated to the team and investors will be locked for 12 months, after which 25% of these tokens will be unlocked. The remaining tokens will be unlocked linearly over the next three years.

This tokenomics and distribution method reflects Taiko's emphasis on long-term sustainability, community participation, and decentralized governance. Prudent distribution seems to ensure that the network has the necessary resources to grow while maintaining strong incentive alignment among all participants.

Staking and reward mechanisms

Staking is an important part of the Taiko network as it ensures network security and incentivizes participation. Taiko's staking mechanism is designed to be flexible, allowing different types of participants to contribute to network security and receive rewards.

1.Validator Staking:

Validators need to stake TAIKO tokens to participate in the consensus process. By staking tokens, they gain the right to validate transactions and generate blocks. The amount of TAIKO tokens staked typically determines the likelihood of a validator being selected to generate a block, with a greater stake increasing the chances of being chosen.

Validators earn TAIKO token rewards by successfully generating blocks and validating transactions. These rewards are incentive measures to encourage validators to act honestly and maintain network integrity.

2.Punishment Mechanism:

To ensure that validators act in the best interests of the network, Taiko implements a penalty mechanism. If a validator acts maliciously or fails to perform their duties, a portion of their staked tokens may be cut; This acts as a deterrent to bad behavior and helps maintain the security of the network.

The penalty mechanism also applies to validators who are offline or unable to fulfill their duties. This ensures that only active and reliable validators can receive rewards, while those who do not contribute to network security will be penalized.

3.Validator Staking:

The prover responsible for generating and verifying zero-knowledge proofs also participates in staking. By staking TAIKO tokens, the prover is incentivized to generate accurate and timely proofs, which is crucial for the network's operation.

Validators are rewarded based on the quality and speed of their validation. Validators who are faster and more efficient will receive higher rewards, encouraging them to continuously improve and compete.

4.Delegation Staking:

Taiko supports delegated staking, allowing token holders who do not wish to run validation nodes to delegate their tokens to the validators of their choice. This mechanism enables more people to participate in network security, even if they lack technical expertise in running nodes.

Delegators share in the rewards generated by the validators they support, incentivizing them to participate in the network's staking process.

5.Liquidity Mining and Incentives:

Taiko may offer liquidity mining programs, where participants earn TAIKO tokens by providing liquidity to decentralized exchanges (DEXs) and other financial applications based on the Taiko network. These programs are designed to attract liquidity and users to the network, enhancing its utility and adoption.

The economic incentives within the Taiko network are carefully designed to promote active participation, network security, and long-term sustainability. These incentives are aligned with the interests of various stakeholders, including validators, stakers, developers, and ordinary users.

Highlights

• Uses of the TAIKO Token: The TAIKO Token is key to cybersecurity, governance, transaction fees, and incentivizing active participation within the ecosystem.
• Token allocation: TAIKO tokens are strategically allocated to early investors, development team, community incentives, staking rewards, and network treasury to ensure long-term sustainability.
• Staking Mechanism: Staking helps to ensure network security, with validators and attestors staking TAIKO tokens to participate in the consensus process, earn rewards, and ensure network integrity.
• Economic incentives: The network provides a variety of economic incentives for validators, attestors, developers, and users to promote active participation and network growth.
• Governance and Sustainability: The decentralized governance model allows token holders to influence network decisions, ensuring that Taiko remains community-driven and sustainable in the long term.